Most of the studies that have been done on corporate longevity have focused on the trajectory of the largest organisations (like those in the S & P 500) and the prevailing narrative has been one of shrinking lifespans and growing mortality rates. But Dartmouth professor Vijay Govindarajan and his research team have now conducted a far more comprehensive study covering the full range of almost 30,000 companies listed on U.S. stock markets from 1960 to 2009. Their findings support the dominant narrative of increasing mortality. They found that those that had been listed before 1970 had a 92% chance of surviving the next five years, whereas those listed from 2000 to 2009 had only a 63% chance (and this was even controlling for dotcom boom and recession).
But the beneath this headline, there were other interesting findings about the type of companies that are fuelling this trend. It turns out that the trend is being driven by more recently listed businesses (since 2000) that are grounded in newer, digitally-empowered business models and services rather than older businesses that invest more heavility in physical assets. The digitisation of business is indeed bringing greater efficiency and opportunity, but it comes at the price of stability and greater surety. Say the researchers:
'The good news is the newer firms are more nimble. The bad news for these firms is that their days are numbered, unless they continually innovate.'
Sounds familiar. And it makes me wonder whether, with digitisation increasingly reaching into physical product, infrastructure, manufacturing and logistics, this trend will more and more be driven by the broadest possible set of businesses.
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